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Asian airlines cut services
SINGAPORE (Reuters) -- Several Asian airlines have moved to cut services and slash costs ahead of an expected travel and cargo slump, even as shares rose on hopes that a U.S.-led assault on Iraq will be brief. An overnight buying spree in battered European and Asian airline stocks spread to Asia, adding to worries over a severe type of pneumonia spread by air travellers which has prompted various governments to warn against unnecessary visits to mainland China, Hong Kong and Vietnam. "People's view, including my view, is that war is going to be quick and as such the airlines have been discounting quite a lot of uncertainty," said Philip Wickham, Asia aviation analyst at ING Financial Markets in Hong Kong. "In terms of the flu I don't think it's going to be much of an issue." Several Asia-Pacific airlines announced service cut-backs and cost cuts, as U.S. President George W. Bush gave Iraqi leader Saddam Hussein 48 hours to leave or face war. Qantas Airways Ltd, Australia's flag carrier, said it would axe the equivalent of 1,000 jobs -- equal to three percent of its workforce -- by forcing staff to take leave as it trims expenses ahead of the possible conflict. Korean Air Co Ltd, the world's third-largest freight carrier, said it was scaling back international routes and beefed up security. "We're stepping up security measures and will scale back unprofitable routes to save fuel costs," said spokesman William Han. Korean Air's stock gained 9 percent and Qantas rose 4 percent. Singapore Airlines Ltd, Asia's most profitable airline, rose 3.13 percent. Shares of the city state's airline fell 5 percent on Monday after it reported a sharp fall in February traffic. Asia's largest carrier, Japan Airlines System Corp, rose 0.8 percent. The region's fourth-biggest airline, Cathay Pacific Airways Ltd, rose 1.38 percent and Air New Zealand was up 6 percent. The share buying came despite travel alerts in the region following the spread of a deadly, mysterious sickness and warnings by several Wildcard
Asia's airlines have generally fared far better than their global counterparts due to a stable operating environment, strong balance sheets and relatively little threat from growing numbers of low-cost carriers. Asia will likely retain its position as the world's most profitable airline region this year, chalking up aggregate profits of US$3.2 billion, compared with profits of US$2.6 billion in Europe and a combined loss of US$4.5 billion for U.S. carriers, according to a recent research report by investment bank UBS Warburg. A wildcard is growing concern over the spread of the mysterious severe acute respiratory syndrome, a highly contagious respiratory disease that may have killed nine people and made hundreds sick since originating in China late last year. Most infections have been concentrated in China's Guangdong province, Hong Kong and Vietnam, causing a scramble this week to avoid certain holiday destinations. ING's Wickham reckons the impact on regional airlines from the deadly form of pneumonia could be brief, and said shares in Singapore Airlines and Cathay still could rise 20-30 percent from current levels. "It's going to be a very short-term impact. It's not as if they are going to quarantine Hong Kong for years," he said. "Yes there has been a bit of an impact with some people canceling flights, but if there isn't another rash of people getting sick with this atypical pneumonia, by around March it should be back to normal," he said. U.S. carriersShares in the hard-hit U.S. airline sector, which has fared the worst worldwide in the last two years, rebounded on Monday, while investors in Europe bought back carriers trading below levels hit after the September 11, 2001, attacks. Among major U.S. carriers rising were the world's largest airline -- American Airlines parent AMR Corp -- which rose nearly eight percent to $1.64 and No. 3 U.S. carrier Delta Air Lines Inc, up nearly seven percent to $8.56. Prices for U.S. airline shares are at low levels, most below $10 per share, after record financial losses in 2002. British Airways and Deutsche Lufthansa, Europe's two largest carriers, have warned a war could hit traffic volumes by as much as 20 percent and are spurring cost-cutting programmes. In the Gulf, disruptions to airline service had begun but were expected to be limited. Airlines are generally better equipped to use alternative routes than they were during the Gulf War in 1991, industry officials said. Kuwait, Qatar and parts of Saudi Arabia are among the key destinations expected to be affected. "We have had assurances from Iran and the Emirates that they will keep their airspace open," said a spokesman for the International Air Transport Association, the Geneva-based trade association for the world's airlines. "People have to remember there are not too many flights crossing Iraq to begin with," he said. Copyright 2003 Reuters. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.
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